Why employees of Flipkart frowning upon ESOPs buyback policy

The biggest deal in the Indian e-commerce history finally has come to closure. While investors, promoters, as well as the entire ecosystem, are celebrating the unprecedented deal, employees of the Bengaluru-based firm are not happy with the ESOPs buyback policy.

During the Walmart-Flipkart deal, the Bengaluru-based e-commerce marketplace employees were informed that they have the option of cashing out 100 per cent of their vested stock options.

According to an ET report, Flipkart employees may be allowed to liquidate 50 per cent of their vested ESOPs during the first year, with former employees being allowed to liquidate 30 per cent of their vested ESOPs.

The report also added that current employees will have the chance of cashing out 25 per cent each in the second and third year, but the former employees would have to wait it out till the company goes for an IPO.

Notably, Flipkart’s stock option offerings last for a period of over four years, and employees are allowed to sell these off after a one-year lock-in period.

A separate report on this matter estimates that there are over 2,000 employees, who own ESOPs across Flipkart, Myntra and Jabong. Among them, about 200-250 employees of Flipkart, 150 of Myntra and additional 50 of Jabong are eligible to exercise the option as part of the deal.

Flipkart has set aside $500 million to repurchase employee stock options as a result of Walmart buying $77 per cent stake in Flipkart through a $16 billion investment. Walmart’s investment includes $2 billion of new equity funding.

Some sources also outlined that Flipkart doesn’t have money to buy 100 per cent of everyone’s stock options, they need to retain some of the money for growth.

Former employees may not be pleased with this, it is usually not the norm for companies to allow employees to hold ESOPs once they leave the organisation. Further, employees are entitled to a reward only for the value they have created during the time of their employment.